Mick Wallace (Wexford, Independent) | Oireachtas source

I move amendment No. 43:

In page 41, between lines 35 and 36, to insert the following:"Use by Multinational Companies based in Ireland of "Single Malt" tax avoidance system

25.The Minister shall, within 6 months of the passing of this Act, prepare and lay before the Oireachtas a report analysing the use by Multinational Companies based in Ireland of a system known as "Single Malt", which directs profits to countries with which Ireland has a double taxation agreement but that do not have any corporation tax, and the impact this has had on returns to the Irish Exchequer.".

This amendment relates to research carried out by Christian Aid, which has pointed out that, following the announcement by the former Minister for Finance, Deputy Noonan, in October 2014, that he was ending the double Irish tax scheme by making it a requirement for a company registered in Ireland to also be tax resident, a new scheme was soon developed, which Christian Aid has coined the "single malt", which provides the exact same tax avoidance benefit as a double Irish scheme.

As Members will be aware, although the former Minister, Deputy Noonan, stated that he had abolished the double Irish scheme and used strong language when he stated that abolishing the ability of companies to use the double Irish will help tackle aggressive tax planning by multinational companies, he forgot to add that he would allow companies already using the double Irish scheme to continue to use it until 1 January 2021 and he gave companies which were not availing of it a three-month window to get set up before the rules kicked in - nice concessions, if one can get them.

As Deputy Noonan was announcing this change, tax advisers in the United States were already promoting the new single malt structure. A note, written in October 2014 by a tax expert in a well known US tax firm following the announcement, states:

this does not mean the objective [of the double Irish] cannot still be achieved in other ways. Ireland has an extensive treaty network. At least two of these treaties contain management and control residency standards and are with countries that have similarly low tax rates. Specifically, it is possible to form an [Irish non-resident company], as under existing structures, with its management and control in Malta. ... that company should be treated as a resident of Malta, and not Ireland ... Malta does not impose any tax on royalties derived from patents, trademarks, or copyrights (resident non-domiciled companies also are exempt from Malta tax on foreign source income that is not remitted to Malta.) And since Malta is an EU member state, royalties paid from an Irish company to a Malta company should not be subject to Irish withholding tax. Thus, this Malta company should provide essentially the same benefits as [a] Bermuda company ... Alternatively, the [double taxation] treaty between the United Arab Emirates (UAE) and Ireland likewise has a management and control standard, and the UAE does not impose corporate income tax. The Ireland-UAE treaty also exempts royalty payments from withholding tax.

Thus, notwithstanding the Irish proposal, it should still be possible to achieve the same results using a company managed and controlled in Malta or the UAE, rather than in a Caribbean nation.

It is a bit scary that Ireland currently has 73 double taxation treaties with other countries and more are currently being negotiated. In its report, Christian Aid pointed out that Ireland's double taxation treaties with other countries override Irish domestic tax law.

I have debated the role double taxation treaties play in tax avoidance with the former Minister on many occasions. During the 2016 Finance Bill debate, when it was announced that a withholding tax of 20% would apply from next year on certain property distributions from Irish funds to non-resident investors, Members pointed out that it looked doubtful that the rate of 20% withholding tax could even be applied to the majority of these non-resident investors.

The Department of Finance confirmed to me that non-resident investors may seek relief from the newly enacted 20% withholding tax if they are resident in a country with which Ireland has a double taxation agreement. The Minister for Finance, Deputy Noonan, made the point to me at the time that non-resident investors may be also able to seek relief from the dividend withholding tax if they are resident in a country with which Ireland has a double taxation agreement. That is a standard feature of double taxation treaties and is based on the OECD Model Tax Convention. He added that he was sure that I was familiar with the notion that one does not pay tax twice in different jurisdictions on the same profit. Tax is paid once and where there are double taxation agreements the tax is paid in the country in which the person is tax resident. If a person pays the tax in the other country he or she gets a credit against his or her tax liability in the country of residence. The problem with that agreement, as a briefing note from a US tax firm points out, is that Ireland has tax treaties with countries such as the United Arab Emirates, which has no corporation tax, which is currently involved in the bombing of Yemen and where it is very easy to set up a brass plate company. Christian Aid has made the point that although companies using the double Irish scheme can continue to do so until 1 January 2021, a preliminary search of the Irish and Maltese company registries shows that at least four multinationals have already established holding structures with Irish registered but Maltese tax-resident companies.

The amendment calls on the Minister to lay before the House, within six months, a report analysing the use by multinational companies based in Ireland of a system known as single malt, which directs profits to countries with which Ireland has a double taxation agreement that do not have any corporation tax and the impact this has had on returns to the Irish Exchequer. I ask the Minister to give the amendment serious consideration.

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